The euro surged more than 2% against the dollar on Thursday, marking its best day in over nine years, as investors turned away from the greenback following President Donald Trump’s announcement of unexpected and harsher tariffs on U.S. trading partners. Safe haven currencies such as the yen and Swiss franc also saw a spike as the dollar weakened to six-month lows against both of those currencies.
Trump revealed that he would impose a 10% baseline tariff on all imports to the United States, as well as higher duties on some of the U.S.’s largest trading partners. The new tariffs sparked fears in the markets that a full-blown trade dispute could cause a global economic slowdown and fuel inflation.
The euro rose by 2.2% to a six-month high of $1.1021, marking its biggest intraday gain since December 2015. Meanwhile, the dollar fell 1.8% against the Japanese yen to 146.65, and 2.25% against the Swiss franc to 0.8618. Both safe haven currencies were at their strongest against the dollar in six months.
Deutsche Bank also warned on Thursday about the risk of a crisis of confidence in the U.S. dollar, noting that significant shifts in capital flows could overpower currency fundamentals, causing currency movements to become erratic.
With tariffs already in place on aluminum, steel, and autos, Trump’s announcement added to concerns of escalating trade tensions. Analysts noted that the harsh tariffs are likely part of a negotiation tactic, keeping markets nervous in the near future.
Investors are concerned that other countries might retaliate with their own measures, leading to higher prices. EU chief Ursula von der Leyen called the tariffs a major blow to the global economy and warned that the EU would respond with countermeasures if talks with Washington failed.
Global trade war fears have mounted since Trump took office in January, exacerbating concerns about recession and weakening the dollar. China’s onshore yuan dropped to its weakest point against the dollar since mid-February, while the Vietnamese dong hit a record low.
The Mexican peso and Canadian dollar strengthened, with the dollar falling about 0.7% against both.